While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are two profitable companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Home Depot (HD)
Trailing 12-Month GAAP Operating Margin: 13%
Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE:HD) is a home improvement retailer that sells everything from tools to building materials to appliances.
Why Does HD Fall Short?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 33.4% that must be offset through higher volumes
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 3.3% annually
Home Depot’s stock price of $382.03 implies a valuation ratio of 25.7x forward P/E. Dive into our free research report to see why there are better opportunities than HD.
Two Stocks to Watch:
Northwest Pipe (NWPX)
Trailing 12-Month GAAP Operating Margin: 9.3%
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ:NWPX) is a manufacturer of pipeline systems for water infrastructure.
Why Do We Like NWPX?
- Annual revenue growth of 12.5% over the past five years was outstanding, reflecting market share gains this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 19.9% to outpace its revenue gains
- Free cash flow margin increased by 13.7 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Northwest Pipe is trading at $74.28 per share, or 19x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
GE Aerospace (GE)
Trailing 12-Month GAAP Operating Margin: 20.1%
One of the original 12 companies on the Dow Jones Industrial Average, General Electric (NYSE:GE) is a multinational conglomerate providing technologies for various sectors including aviation, power, renewable energy, and healthcare.
Why Is GE a Top Pick?
- Market share has increased this cycle as its 15.3% annual revenue growth over the last five years was exceptional
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 47.1% exceeded its revenue gains over the last two years
- GE is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $320.76 per share, GE Aerospace trades at 41.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.